Quarterly Update - QVM Portfolio

5th Apr '16 by Tom Firth

6 comments 7841 reads

This is following on from a previous update I did on a paper portfolio I’ve been running since August last year. I’ve just put it through a second rebalancing and thought I’d share the results again. It is actually almost 3 weeks late to be honest but things have been busy at work and I’ve just not got round to doing it until now.

A quick recap…

Last time things got off to a pretty hairy start as I started the portfolio shortly before a market downturn in late August. Despite early losses, the whole thing came back later in the year to end about 5% up including the effects of dividends and transaction costs (commission plus SDRT where appropriate). Not bad for a period where the market was down about the same.

I concluded though that some changes should be made to the approach which, admittedly, had been thrown together fairly haphazardly. The changes were as follows:

I decided to exclude Oil & Gas and Mining shares until things looked a little more positive in that space.
I chose to remove the additional F-Score criteria for fear of double counting (though I am still sorting by F-score when picking my 30 stocks).
I added in requirements of PB > 0 and PE > 6 to try and filter out companies with negative equity and ‘too good to be true’ valuation ratios. Not perfect by any means, but possibly better than nothing.

How did we do this time around?

Well, poor timing seems to be a theme on this one as shortly after rebalancing the market took yet another turn for the worse… For a couple of months the whole thing was highly volatile and I ended up giving up around half my gains by early February.

Thankfully, comebacks are second recurring theme here and the portfolio rebounded strongly with the overall market and ended at around a 9.5% gain since inception by the 30th of March. This includes the effects of dividends and, as always, transaction costs.

Here’s a look at the performance to date after selling all the holdings from this quarter:

And a look at the performance this quarter:

57039015411a0Performance_this_Quarter.pn

Note that the upticks in cash are me being lazy with dividends. I can’t be bothered to look up individual dividends and put them in so I just deposit cash equal to the portfolio yield divided by…

Unlock with Email

Unlock with Google

Already have an account?
Login here

vik2001

5th Apr '16

thanks for this Tom was a great read.
how did you go about selecting your stocks? was it just picking up the top in the QVM ranks with some criteria filters?

Rusty2

Yes I would like to know, Ab Dynamics (LON:ABDP) I thought was never rated that highly? Its a good performance in this market, much better than the dummy NAPS I have set up. Do you have the performance figures excluding dividends?

Tom Firth

Hi - the screen for the stocks this time round was this this one:

http://www.stockopedia.com/screens/qvm-67830/

I just picked the top 30 from that list! Very simple. In December the process was the exact same but I didn't have the spread requirement in there.

Let me know if you've got any other questions!

Tom

Hi Herbie,

Back in December Ab Dynamics (LON:ABDP) did have a StockRank in the low 90s, have a look at this old StockReport here:

http://reports.stockopedia.co.uk/133252620/gb/Ab_Dynamics_LSE_133252620_20151205.pdf

As the screen is sorting by F-Score, there is a good mix of StockRanks but all were above 90 in December.

Sure re the dividends - I have so far put in two dividend deposits of £5,500 and £7,612 respectively. This totals to £13,112. If we knock that off the (approximately) 1,095,000 valuation at quarter end that would come to £1,081,888 which gives a gain of about 8.2%. Thats a little harsh in my opinion as that includes all the transaction costs I've put in (SDRT, commissions and spreads) but doesn't count the dividends! Always better to be conservative with these things though as I'm sure you'd agree.

I'm quite surprised by the performance to be honest - it has been a bad market as you say. Just breaking even would be an achievement really at present. Personally, I think there's a fair deal of luck involved with a good short term performance like this one but I'm not complaining!

Tom

Thanks Tom. I did hold ABDP until recently, did not realise it went into the 90s. It will be interesting to see how this compares with NAPS selection method.

I'm not exactly sure how the rebalancing works, do just redo your screen and replace the ones not on it, as I see ABDP is no longer on it, if you run it now?

Yes its all about timing, some of your losers are my winners, Universe (LON:UNG), Cambria Automobiles (LON:CAMB).

The rebalancing was done very crudely - first I sold every single stock on the folio from before so that the portfolio was empty. Then I bought the top 30 from the screen ensuring an equal weighting for each. The effect is that I have removed all stocks not on the screen and brought all holdings to represent an equal weight in the portfolio.

I would not do this for a real portfolio of course, as it creates unnecessary transaction costs for stocks which are still in the screen. For stocks still qualifying for the screen I would calculate how much I had to buy/sell to bring them back to an equal weighting (3.33% of the total folio in this case) and then make that one transaction.

I went for a simple method like I outlined above though because, to be honest, its only a paper portfolio and I am a little lazy with it. Selling everything and then just working out the number of shares I need for each holding in the screen on a simple spreadsheet means I can blast through the whole process in about 20 minutes. I might start putting in a bit more effort going forwards though as I think I will keep the experiment going for a little while. That the portfolio has done alright despite my rough rebalancing tactics is quite remarkable!

Hope that helps,

Tom

Quarterly Update - QVM Portfolio

Unlock the rest of this article with a 14 day trial

About the Author

Tom Firth

6 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...